Market movers today
We start the week on a quiet day in terms of data releases, but markets will keep a close eye on the Brexit developments, where the next question is whether Theresa May will survive as party leader and prime minister in the coming days (see Brexit Monitor - Decent Brexit still base case but uncertainty has risen , 16 November).
In the US, we get housing starts and building permit data for October. Recently, the housing market has looked a bit shaky, but numbers for September were probably influenced by the hurricane season. Hence, we will keep an eye on whether we see a recovery in October and the coming months.
Later this week, PMI data both in Europe and the US as well as the next stage in the Italian budget fight with the European Commission will be in focus.
Italy will likely also be discussed at today's Eurogroup meeting, although the main agenda is dedicated to discussing euro area reforms.
In Sweden, housing construction data for Q3 is in focus, which could show another drop in housing construction (see next page).
Selected market news
The US Treasury market rallied on Friday after soft comments from the Fed's Clarida and Kaplan. The discussion is now more about whether weaker global growth will impact US monetary policy and less about bringing US policy yields to or even above the neutral level, which was the theme just a few weeks ago after the surprisingly hawkish comments from Powell at the beginning of October. In particular, the front-end of the curve rallied and on top of a widely expected December hike some 30bp is now priced in 2019. We have little doubt that this week the market will continue to scrutinise any signs that the Fed has become more concerned about global growth or if monetary policy in the US is still on auto-pilot.
In the UK, The Sun last night reported that the hard Brexit campaigners in the Tory party need just six more letters to reach the 48 that would trigger a no-confidence vote for PM Theresa May. PM May continues to campaign for her deal publicly on radio shows, etc. Public support among voters is vital for Theresa May. According to The Telegraph , in a speech today to the British Confederation of Industry she will say that the Brexit deal is final and the only thing left to discuss is the future trade deal. In our Brexit Monitor from 16 November we outline possible scenarios from here. We argue that a 'decent Brexit' is still the most likely outcome but that uncertainty has risen.
Over the weekend, APEC leaders had to accept that for the first time since meetings started 25 years ago, they could not agree on a joint statement. Furthermore, US Vice President Mike Pence sharpened his rhetoric towards China, saying that the US was in no rush to end the trade war. Chinese President Xi Jinping and US President Donald Trump are supposed to meet at the sidelines of the G20 meeting in Buenos Aires that begins on 30 November. See also our China weekly published on Friday.
To read the entire report Please click on the pdf File Below..